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Definition

This is a concept from behavioural finance. It is the tendency to evaluate current decisions within the framework in which they have been presented. For example, when the share market is in a bear trend, investors generally become more risk averse. During a bull trend, especially in the final stages, investors are willing to take unusually high risks because of the atmosphere of excitement which pervades the market. Of course, an investors risk is at its greatest in final stages of a bull trend - but his/her thinking is dominated by and dependent on the "frame" of the bull market. Conversely, at the bottom of a bear trend investors are usually very risk averse - and yet, at that point in the cycle, their risk is very low.

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